Physician's Captitation Trends-Employers see 7% hike in insurance costs
Average costs top $4,000 mark
Employer-sponsored health plan costs increase by 7.3% in 1999 — close to three times the rate of general inflation — and there is no relief in sight, according to the Mercer/Foster Higgins National Survey of Employer-Sponsored Plans.
Average costs per active employee increased from $3,817 in 1998 to $4,097 in 1999. That followed the previous year's 6.2% increase. For 2000, these employers are budgeting for an overall 7.5% hike, according to Blaine Bos, a consultant in one of Mercer's Chicago offices and an author of the survey.
Capitation losing its kick
Part of the problem, Bos says, is that capitation is loosing its financial kick in the pants. Throughout most of the 1990s, most employers moved employees into lower-cost managed care plans. But migration out of fee-for-service has nearly bottomed out — down to 11% in 2000 compared to 13% in 1999. With nine out of ten employees already in a managed care plan, employers are looking for other ways to reduce costs.
Rather than shifting pocketbook costs to employees, employer are taking these steps, Bos says:
• Changing pharmacy benefits, particularly by increasing financial incentives to use generic drugs or drugs listed on the plans formulary.
• Limiting or excluding coverage for certain new prescription drugs, tests, or medical treatments.
• Adding chronic disease management and alternative medicine options.
Yet when push comes to shove, larger employers are inclined this year to pay more rather than risk offending their work force, says Bos. In the past year, many employers added vision plans (now offered by 46% of employers, up from 42%); long-term care insurance (16%, up from 12%); and health care spending accounts (60%, up from 56%).
Retirees are the ones bearing the brunt of high costs, the survey indicates. For the sixth consecutive year, the percentage of large employers providing coverage to Medicare-eligible retirees fell in 1999 from 30% to 28%.
Coverage to retirees not yet eligible for Medicare slipped from 36% to 35%. Employers who require pre-Medicare-eligible retirees to pay the full cost of coverage jumped from 36% to 42% in 1999.
Participating in the survey were 3,166 respondents, representing about 600,000 employers and more than 90 million employees.
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